Capping carbon-trading risk

By Sophie L'Helias

Posted November 4, 2013

A global cap and trade market now seems imminent. But are we creating a monster we can't control?

Judging from the flood of press releases in recent months announcing cap and trade schemes for carbon emissions, we may have reached a watershed moment. A global carbon trading market appears to finally be emerging, and this will mean trillions of dollars of carbon derivatives traded daily.

The financial windfall is expected to be enormous. According to Point Carbon, a carbon consultancy owned by Thomson Reuters, the carbon derivatives market is estimated to reach $3 trillion by 2020. That would make the carbon market larger than the subprime mortgage market and hedge fund industry combined – before the 2008 financial crisis.

Gender in the balance

According to Catalyst’s 2012 Census of Fortune 500 companies, only 16.6 per cent of board seats were filled that year by women, while only 3.8 per cent of chief executives were female. Catalyst also found that women held 14.3 per cent of executive officer positions – the same percentage for three consecutive years.

It’s not what one would call healthy diversity, but there is reason to believe the demand for women directors is growing as CEOs around the world are increasingly threatened with gender quotas. While quotas are not an issue in the United States, business leaders are increasingly feeling pressure from women rights advocates, consumers and investors who seek greater board diversity.

Rookie of the year

The carbon industry has been allowed to grow without restraint, but it's time for regulators to step up to the plate.

Financial markets posted their worst decline in May since 1940. While most investors are still licking their wounds, those who bet on the carbon financial industry are reaping gains from the global consolidation in the industry. In less than a decade, the carbon financial industry has been catapulted to the major leagues.

On May 27, Canadian media and data conglomerate Thomson Reuters announced it would acquire Point Carbon. Founded in 2000, Point Carbon is a Norwegian-based carbon consultancy that provides news, data, and analysis to hedge funds, financial institutions, businesses, and governments. Backed by investors such as Schibsted ASA, Norway’s largest media company, JPMorgan Chase & Co., and Mizhuho Financial Group, Point Carbon has a staff of 137 and offices in Asia, Australia, and the United States.